Virtual Power Plants Bypass Costly Infrastructure Projects And Build Rapport With Stakeholders

Utilities are deploying smaller-scale energy resources rather than building larger projects to supply or deliver electricity. But they are going one step further — gathering the collective energy from such things as battery storage and demand response devices to form “virtual power plants.”

Virtual power plants have the potential to change the energy horizon by harnessing the electricity from local assets and redistributing that power to where it is most needed — all facilitated by cloud-based software that has a full panoramic view. Indeed, this structure beefs up America’s generation and delivery network while avoiding expensive and contentious projects, winning praise from environmentalists.

“Let’s say you are a large utility, and your load is 10,000 megawatts. That’s like 10 nuclear plants or 10 large plants. Instead of relying on those 10 plants, you may be relying on 10,000 units — generation installed across multiple locations. It’s the first-of-its-kind of transition for utilities. The sky is the limit to the capabilities of this,” says Ahmed Mousa, the manager of the utility of the future for the Public Service Enterprise Group
PEG
or PSEG. He spoke during a press event hosted by the United States Energy Association where this reporter was a panelist.

Guidehouse Insights says by 2030, decentralized generation will total more than 500,000 megawatts of capacity, while centralized generation will amount to 280,000 megawatts. The market is already deploying more rooftop solar with battery storage than big power plants. Virtual power plants have a bright future because they can orchestrate those assets.

Solar-plus-storage, microgrids, electric vehicles, and demand response can participate. For it to work, the aggregator must guarantee their engagement, and in return, the asset owners — often commercial and industrial customers — will get paid. For their part, utilities can defer investments in capital-intensive ventures such as power plants and transmission lines.

“Utilities must be partners — the brains that know when to dispatch,” says John Reynolds, president of Agile Fractal Grid, during the press event.

But local lines are still vulnerable

Think of it this way: a centralized coal-fired unit may have a 1,000 megawatt generating capacity of electricity. It is also connected to a transmission network, making it susceptible to cyberattacks or natural disasters. But a distributed energy system, under the umbrella of a virtual power plant, would have 200,000 subsystems. Or, 200,000 5-kilowatt batteries would be the equivalent of one power plant with a capacity of 1,000 megawatts.

For example, New Orleans has eight transmission lines that feed into the city. But Hurricane Ida knocked out all of them in August 2021. The city also hosts about 200 megawatts of onsite generators to keep hospitals and industrial sites operating during mass outages. A virtual power plant configures the onsite generation, battery storage, and demand response with software programs.

Virtual power plants and microgrids don’t need long-distance, high-powered transmission lines. But they rely on the local distribution grids, which wildfires and strong winds can also destroy. How does this impact system operators and distributed energy resources?

“Local lines can be taken down, but you can still have pockets where those lines are available — where people can congregate and have power available. No question: you can’t get power between two points if the distribution line goes down. But the more distributed resources you have, the less susceptible to single contingencies you are and the more opportunities you have for power,” says Jon Wellinghoff, former chairman of the Federal Energy Regulatory Commission and the chief regulatory officer for Voltus, Inc.

However, “You still need the long distance, high voltage, regional transmission lines that deliver large amounts of renewables to load centers,” adds Wellinghoff. “We still need more transmission in this country, and I’d be the first to support that.” Still, there’s “between 15% and 25% where local resources can substitute for transmission upgrades if placed correctly into the system.”

He said 28 million electric vehicles will hit the roads in the United States by 2030 — storing more electricity than this country’s power plants. The battery storage in those vehicles is a valuable asset that could join in the collective aggregation strategy, supplying backup power if the primary grid is down and the localized microgrid must step up. However, the aggregators must fairly compensate drivers to get them involved in the wholesale electricity market.

The landscape is literally changing

Virtual power plants are possible because of an order written by the Federal Energy Regulatory Commission, or FERC Order 2222. That enables those assets to be aggregated and bid into wholesale energy markets run by grid operators.

Aggregators can monitor and manage those distributed energy resources through cloud-based programs. Industrial and commercial businesses can curtail their demand at certain times, reducing stress on the electricity network. For example, aggregators enlist companies willing to hold back during peak usage — an electricity bundle packaged and sold into energy markets.

“Our operation centers will look much different because we’ll need screens showing us where the solar is, where the batteries are, and where the demand response is. We have to see them and know that they will respond. It allows us to monetize the risks — the same way we would a power plant,” says Rudy Garza, president of San Antonio-based CPS Energy.

Red Feather Lakes, Colorado, illustrates the potency of distributed energy resources. The community has suffered frequent outages because of winter storms — served by a single transmission line. It now has rooftop solar panels connected to battery storage and a microgrid — with a propane-fueled backup generator. According to Duane Highley, chief executive of Tri-State Generation and Transmission Association in Denver, the utility averted a second line over the mountain, thus avoiding conflict with the environmental community. It also saved millions.

“We still see significant economies of scale and building projects at utility scale. But we know our members and customers are building many small distributed resources,” says Highley. “By the end of this decade, at least in our region, we will run the system on a majority of renewables.”

Virtual power plants and distributed energy resources will help power the green energy economy. Indeed, aggregators collect disparate electricity loads and steer that to where it is needed. Solar assets, battery storage, and electric vehicles add value to businesses and provide communities resilience, bypassing expensive infrastructure projects while building rapport with key stakeholders.